Indian Land Development and Sale, Introduction To #328

By Gerry Neely
B.A. LL.B.

Anyone involved for the first time in the sale of an interest in reserve land will find little that resembles the more usual sale of fee simple land with which we are familiar.  The outright sale of reserve land is a rarity, occurring usually as part of a trade of land, because the land is lost to the First Nation.

Instead, the principal legal structure for the development and transfer of an interest in reserve land is a landlord/tenant relationship described in a headlease, a sublease and assignment.  A buyer is a tenant who acquires a right to possession of reserve land.

Provincial laws such as the Strata Property Act and the Real Estate Act may not apply to lands reserved for Indians, because that is an area of exclusive federal jurisdiction; although they may apply if they are incorporated into federal laws.  Whether a provincial law of general application, such as traffic laws will apply, depends upon the extent to which they are directed to Indians specifically.  Builder's liens are not registered and registration may not establish the priorities of charges.

Municipal zoning and building bylaws may only apply to reserve lands if they are incorporated by contract or by a bylaw of a First Nation.  A band may displace a municipality's power to tax non-natives on a reserve by exercising the jurisdiction the band has under the Indian Act and the Indian Self Government Enabling Act.

Only a few older legal interests in reserve are registered in the Land Title Office.  Such interests are now to be registered in the Indians Lands Registry established in 1967 in Ottawa.  Unlike our Torrens system of registration, which does not require an historical search beyond the current title, a search in the Indian Lands Registry must be made back to the document that created the interest, which is described as the root of the title.

The origin of that root depends upon whether the reserve land is BAND LAND OR LOCATEE LAND.  Band land is held for the benefit of all members of the band.  They must vote in favour of whatever commercial, industrial or residential development they want on a designated and described area of the reserve.  Upon approval by the band members, the area is surrendered to the Federal Crown to be accepted by Order in Council.

The Crown becomes the headlessor under a lease which may be in favour of a developer that may be a corporation controlled by the band.  The latter in turn, enters into sublease with a sublessee who is entitled to, for example sole possession of the residence beside the 18^th hole of the golf course built by the band corporation.

Locatee lands are those which have been allotted by the band council by resolution to an individual band member for his or her own benefit.  A locatee can lease such land without a vote unless the lease is for more than 49 years, in which case, a referendum of band members is required to approve it.  Even if the lease is for less than 49 years, the band council is asked for its input as to whether the intended purpose may be detrimental to the band.

As to financing, the Indian Act states that the real and personal property of a First Nation or member of it cannot be mortgaged or subject to attachment by a non-native.  Clearly this hindered a band's plans for development and the Act was amended to allow mortgages of designated land.  That did not include locatee land, which remains difficult to finance.

The security to be given to a mortgagee will likely be a mortgage of the lessee's interest in the sublease and, if there is a homeowners association, the shares of it.  The conveyancer acting for the mortgaged will need to be satisfied that the headlease is in good standing and that its terms do not negatively impact the mortgagee's right to lend and to foreclose.

Most mortgages will not fund until the assignment of sublease to the buyer and the mortgage have been registered.  Since this process takes several days, it creates a timing problem for sellers, particularly those who are depending upon the funds for the for the purchase of other property.

There is nothing simple about the purchase by sublease of reserve land.  The headlease, and perhaps the sublease, will be lengthy and complicated.  There may be a service agreement with the local municipality or regional district, whose bylaws may also affect the sublessee.

Words such as lengthy, complex and frustrating seem to be part of any discussion of this subject.  Leasing requires approval from one of more of the following:  a band member, band council, band membership, the Minister of Indian Affairs and Northern Development and the Governor in Council.

This column highlights just a few of the many aspects of the economic development of reserve lands that are apparent when one travels through the province.  Self-education is a must for any licensee who decides to specialize in this area of property sales and who wants to be not only proficient but damage proof.

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